I have been attending the Sales and Operations Planning (S&OP) Summit meeting being sponsored by IE Group. It was good to be able to once again meet and chat with fellow Supply Chain Expert Community blogger, Trevor Miles, and also say hello to Lora Cecere.
After the first day of sessions, I personally came away with some specific thoughts and observations.
The day was filled with many presentations from various manufacturing, retail and service firms. Their overviews represented various stages of maturity in implementing S&OP, from just getting started to fully deployed.
What struck me however are the contrasting messages that surround the role of IT applications in enabling an S&OP process. Some consultants and practioneers seem to pitch a message that S&OP can be implemented without any IT automation, that the process is really the most important focus. In my view, process is certainly the most important objective, and as a singular goal, getting the process adopted is indeed important. But at the same time, it is rather important for implementation teams to step back and reflect on what the S&OP process is intended to address, namely an integrated and aligned decision-making process. I would quickly hasten to also add that in today’s reality of both around the clock global markets and source anywhere supply chains, not having a context for IT automation can be a critical missing component in this decision-making context. Let me briefly explain.
Today’s global supply chains introduce four critical challenges that need to be overcome in an S&OP process:
1. Time sensitivity and information complexity- the speed of doing business globally implies round-the-clock activities and the ability to overcome time and geographic barriers. The complexity of today’s global-based business models also adds far more variability into the planning process. S&OP specific applications can collect and analyze data continuously, as well as alert to important exceptions to plans. While some S&OP needs can be accommodated by spreadsheets, the need for constant updating and data refreshes can exceed the required S&OP process cycle time, which dilutes that creditability of the process. For example, a monthly S&OP cycle may be too late to respond to demand or supply exceptions that are a week old.
2. Realities of the clock-speed of business- in certain industries such as high tech and consumer electronics, the clockspeed of business runs at an incredibly rapid pace. The recent severe global recession has driven home how quickly and how suddenly market demand can change. Products also can have short life cycles, with needs for constant phase-in and phase-out. Periods of maximum profitability are short, and supply chain participants change constantly. Some traditional consumer products companies have also reached this faster clockspeed stage, with more innovative products or regional-specific products being constantly introduced in markets. S&OP specific applications integrate and track the various linkages among products and can also provide an ongoing audit-trail of the various decisions made within the S&OP process. These applications also provide a faster means for converting higher-level product related plans into individual unit or stockkeeping unit plans.
2. Virtual organization- incorporating many of the functional participants involved in today’s S&OP not only involves internal functional, but also external customer and supplier teams as well. The constant two-way transfer of planning information across cross-business barriers is best accomplished through tailored IT applications supporting the S&OP process.
3. The broader end-goal- I submit that the roadmap for S&OP eventually leads to a broader closed-loop Integrated Planning Process that extends across the internal and external supply chain. Many of today’s presentations have reinforced the needs for the process to be able to quickly analyze the various implications or options related toward meeting the plan, especially within the Executive Level review phase of the process. When a senior executive inquiries as to what are our options toward meeting a particular demand plan, the last thing that executive wants to hear is that we need a few weeks to analyze various scenarios. Two business-to-consumer firms outlined their success in the ability to analyze the differences among ‘sell-in’ vs. ‘sell-through’ information, which contrasts sales dollar volume to actual shipments from point-of-sale. The importance of quick and timely analysis is almost a given in today’s volatile world of business. Kevin Chynoweth, the vice president of supply chain at Fairchild Semiconductor expressed this notion best. If gaps in revenue, manufacturing or cash objective plans get discovered at the end of the (S&OP) process, it’s too late. He further noted that speed of the process equates to the fact that the process executes faster than how business circumstances change.
One audience member asked a very profound, yet timely question. After our business has spent millions on ERP systems implementation, how can we ever justify spending more on automating an S&OP process? The answer I submit lies in the four critical challenges noted above, and that most of the ERP vendors themselves have been late to recognize the overall importance of providing an S&OP specific application at a reasonable cost. However, best of breed vendors focused specifically on needs in supply chain business process are providing innovative alternatives in enabling S&OP bty overcoming key challenges.
What’s your view? Does justifying an automation solution to S&OP concern these factors?